Will U.S. return to easy money era?

The Federal Reserve recently cut interest rates for the first time since March 2020, signaling a potential easing of monetary policy. This decision comes as the Dow Jones Industrial Average reached a historic high, reflecting investor optimism. Fed Chairman Jerome Powell expressed uncertainty about whether rates would return to the near-zero levels seen during the pandemic, suggesting that the neutral rate is likely higher now. He emphasized that the current economic conditions differ significantly from those during the COVID-19 crisis, which prompted emergency rate cuts. While borrowing costs are expected to decline, they may not reach the lows experienced four years ago. Additionally, inflation remains a concern, with core inflation hovering around or above 2.5%. A Fed governor cautioned that aggressive policy actions could be misinterpreted as a premature victory over inflation, indicating that the central bank has not yet met its inflation targets. Overall, while the easing cycle has begun, the path forward remains uncertain, and the Fed is navigating a complex economic landscape.